Cost Trends and Guidance
Q: What's your outlook on cost trends for the rest of 2024?
A: We're taking a prudent approach to cost trends. In Q2, we booked our cost trend at 7.3% versus the previously forecasted 6.8% to reflect the current environment . For Q3, our cost trend hasn't changed much and remains around 6%. We didn't provide a specific cost trend for Q4 due to high prior-year comparables but have analyzed per member per month costs based on historical seasonality and feel confident in our position.

Medicare Risk Adjustment Impact
Q: Did Medicare risk adjustment affect your revenue this quarter?
A: Yes, Medicare risk adjustment came in lighter than expected. We recorded this adjustment through the first six months and extended it for the rest of the year. The impact was offset by higher-than-anticipated membership and favorable developments in Q1, partially offset by higher cost trends in Q2. We aren't separating the yield and RAF components due to limited data but have updated cost trends and margins on additional membership to compensate.

Payer Negotiations and Revenue Impact
Q: How are discussions with payers affecting your revenue outlook?
A: Payer negotiations are progressing well. Improvements in Q1 added $10 million to our full-year outlook. In Q2, some terminations were retroactively adjusted back to January 1, impacting revenue and cost but having no effect on medical margin . We're encouraged enough to incorporate further improvements into our guidance for the second half. For 2025, we're discussing carve-outs or caps on Part B drugs due to the Inflation Reduction Act, and have achieved this with 2/3 of our payers covering 1/3 of our membership.

Medical Margin Improvement
Q: Are the 2021 and 2022 cohorts reaching target medical margins?
A: Yes, we have groups and markets within those cohorts achieving the $150 to $200 medical margin range. Year-over-year, we've seen improvements across all cohorts, and we're beginning to trend upward.

ACO REACH Performance and Future
Q: How is ACO REACH performing, and what's its future outlook?
A: ACO REACH continues to be a strong contributor with another solid quarter. We're taking a prudent approach in recording results. New lives added this year typically start closer to breakeven. Historically, we've beaten the national benchmark by 200 to 300 basis points annually, with expectations of 100 basis points this year. Changes coming in 2025 are expected and have nominal impact on us. Post-2026, we anticipate continued bipartisan support for full-risk models in Medicare fee-for-service, ensuring long-term program viability.

2025 Cohort Expectations
Q: What are your expectations for the 2025 cohort?
A: We're excited about the class of 2025, which includes five new partners and expands within our existing 13-state footprint. The cohort features strong groups like Graves Gilbert in Kentucky. While being prudent, we expect the starting point to be within the $30 to $60 PMPM range discussed, but we're not ready to specify exact figures as we assess utilization trends and payer rate details.

Retroactive Contract Termination
Q: Why did you retroactively terminate contracts to January 1?
A: We have deep relationships with our payer and physician partners. The payer preferred retroactive termination to January 1, and we accommodated this, resulting in no impact on medical margin . This approach lays the groundwork for positive future relationships.

Data Lake and Impact on Cost
Q: How is the new data lake enhancing care and reducing costs?
A: The data lake allows us to provide timely information to primary care physicians, focusing on high-risk patients. By triangulating data from multiple health plans and EMRs, physicians can identify complex patients and benchmark against best practices. Rolled out in 20 markets to 75% of PCPs, early results show an 8% reduction in ER and inpatient admits.

Reserve Metrics and Completion Ratios
Q: What's causing reserve metrics to trend unfavorably?
A: Metrics like DCPs aren't ideal for our business due to timing differences. Census data shows trends are decreasing from Q1. January was the highest month and is mostly paid by now. We took a prudent approach to reserving, flattening the trend line from 8.2% to 7.3% instead of the previously forecasted 6.8%.

STAR Ratings Impact
Q: Will STAR ratings recalibration benefit you?
A: The STAR ratings recalibration has a nominal impact on us. Less than 1% of our membership would see an increase to above a 4-star plan, so there's minimal effect on our forward impact.

Geographic Expansion Plans
Q: Can you elaborate on changes to your geographic expansion plans?
A: We postponed adding a new partner in 2025 as we work with payers to ensure the market and agreements make sense. We've agreed with the partner to pause activity until we have clarity, reflecting this in our geo-entry plans and forecasts.

Provider Engagement and Clinical Initiatives
Q: How will provider engagement initiatives impact future performance?
A: Our clinical initiatives, including active panel management and PCP engagement, are incorporated into our forecasts. These efforts help physicians manage high-risk patients and are expected to improve cost trends over time.

Medicare Advantage Payer Discussions
Q: How are Medicare Advantage contract renegotiations for 2025 progressing?
A: It's early in discussions, but the next few months will define our payer and product mix for 2025. We're exploring levers like increasing percentage of premium, carve-outs on Part D and supplemental benefits, and risk corridors. Progress varies by market and payer, but we're encouraged by our deep relationships.

Off-Cycle Premium Rate Increases
Q: Should we expect rate increases to hold despite benefit reductions in 2025?
A: Rate adjustments are market-by-market, considering underwriting and benefit adjustments. Given the adjustments health plans are making, improvements in their margin posture could flow through to us as a tailwind in 2025. Our arrangements are typically multiyear, and we're repricing about 40% of our book this year.